South Africa is third in the world when it comes to economic crime, according to PwC’s 2020 Global and Economic Crime and Fraud Survey.
At the launch of the survey in Johannesburg, the PwC forensic team and a panel which included PwC SA’s Global Economic Crime and Fraud Survey Leader Trevor White, highlighted the rising impact of economic crimes in the private sector and the country’s economy as a whole.
The PwC surveyed over 5000 individuals from across 99 territories to compile the survey. In South Africa alone, there were 245 respondents, with the majority (71%) at chief executive level.
South African respondents to the survey reported an economic crimes rate of 60% – the lowest level since 2011 – having improved from 77% in 2018. South Africa follows China and India which reported an economics crimes rate of 69% and 60% respectively.
Although South Africa has experienced a 17% decrease in the level of economic crimes reported, compared to the rest of the world this is a shallow victory. This is largely because the level of reported crime in South Africa remains significantly higher than the global average of 47%.
When a fraud incident occurs, are you taking the right action and learning the right lessons? Find out in our latest Global Economic Crime and Fraud Survey: https://t.co/3dsnMefQtx #GECS2020 pic.twitter.com/tAHlhl8PUp
— PwC South Africa (@pwc_za) March 6, 2020
The types of economic crimes that have been reported in the country vary, with customer fraud being the highest recorded economic crime, according to the PwC report. Incidents of customer fraud that have been reported stand at 47% for 2019, having worsened from 42% reported in 2018.
This is followed by bribery and corruption at 42%, up from 30% in 2018. Accounting or financial statement fraud also featured, showing a 12% increase to 34%. It is anticipated that these crimes are likely to cause more disruption in the country in the next 24 months.
Financial statement fraud is fast becoming alarming as this type of crime involves senior members of companies. According to PwC, senior management involvement in these crimes as perpetrators has spiked to 34% in 2020 from 20% in 2018.
White said financial statement fraud strains the economy and as a result becomes hard to miss. “I think what’s really caused them to start to be exposed is the downturn in the economy. There’s not so many places to hide and as a result, the organisations can’t keep this house of cards going. If there is a small crack, everything crumbles,” said White.
The silver lining on a very dark cloud, is that assets misrepresentation which is one of the popular forms of economic crime in South Africa decreased drastically from 49% to 23%.
“People aren’t considering petty theft – just theft of assets – as an economic crime anymore because there is now the exposure of bribery and corruption and financial statement fraud and cybercrime. They are starting to think that those are the real economic crimes,” White said.
According to PwC, 41% of perpetrators in economic crimes are from within the company, 36% are from outside and 21% of crimes are a combination of both internal and external actors.